As a school announces a novel scheme, we look at the options for financing
private education.

Paying for private schooling for your children is one of the biggest financial burdens you can take on, but one private school came up with a helping hand last week.

The school, Fernhill near Glasgow, will allow parents to spread paying the fees over a number of years after their child has left – effectively an interest-free loan.

The scheme will cut monthly payments by up to half, the school said. Parents will be able to spread paying the fees over 10 years from the date the child joins the school. "The plan is interest-free and there are no other charges," a spokesman said.

Kathleen Boswell, who chairs Fernhill's board of governors, said: "There is high demand from prospective parents for this kind of payment plan and there has been for some time. As this recession lengthens, we believe it is the right thing to do to ease the financial burden on those who want the best for their children."

Other schools are thought likely to consider following suit. Janette Wallis, senior editor of The Good Schools Guide, said: "It's a creative approach to making school fees more affordable that I'm sure many parents will welcome," she said. "Other schools are certainly sitting up and taking note."

One financial adviser welcomed the initiative but warned that it would not always solve parents' problems, particularly if they had more than one child or expected them to go on to university.

"The scheme proposed by Fernhill is admirable, as they are providing parents with another option to achieve the goal of private education," said Philippa Gee, who runs a wealth management firm of the same name.

"My concern is that you may then have more children and will therefore carry a major financial burden as the children grow up, which may prevent the younger ones seeking the same education as their older siblings.

"For example, if you had two children five years apart and planned to send them both to the school for five years of secondary education, previously you would have finished paying for the first by the time you started paying for the second. You would never be paying for both at the same time.

"But under the new scheme you would still be paying for the first child when the second one started, potentially increasing your monthly spending on school fees by 50 per cent.

"Also, you will probably be paying for the school's fees at the same time as having to fund university education. So it may mean you pay less initially but then have a significant financial squeeze for the long term."

What are the options for parents who are not in a position to take up Fernhill's offer (it is a Roman Catholic school that takes only girls in its secondary department)?

It is not all a question of saving like mad to afford the fees. There are various ways to spend less and still get the education you want.

One is to mix state and private schooling. For example, there may be good primary schools or sixth-form colleges where you live, but fewer good secondary schools. So paying for just private secondary schooling might make sense. Or you could pick a private day school rather than a boarding school. Fees for day pupils are typically about half those for boarders. You can search for schools in your local area on the website of the Independent Schools Council (isc.co.uk).

If you have identified the best school but cannot afford the fees, it may be possible to get help in the form of bursaries or scholarships.

Bursarial funds may also be kept in reserve to assist with fees when parents run into financial difficulties, such as a temporary loss of income, after their children have started at the school. The school may help pupils to get through a particular phase of their education, such as GCSEs, although it depends on the circumstances behind the parents' problems.

A third of pupils at schools belonging to the Independent Schools Council received help with fees in 2011, with the assistance amounting to more than £590 million.

Independent charities may also help; see the website of the Educational Trusts' Forum (educational-grants.org) for more details. They are sometimes more willing to help when the child belongs to a one-parent family or has a brother or sister at the same school.

If you do find yourself having to find significant sums to send your children to a private school, how should you go about saving?

Ms Gee said the best approaches were using savings such as Isas or getting help from grandparents, while borrowing was less advisable and using the lump sum from your pension – which you can do from age 55 onwards – was "the last resort".

Patrick Connolly of AWD Chase de Vere, the independent financial adviser, said: "You need a co-ordinated investment strategy. School fees have been rising faster than the cost of living, so it needs careful planning.

"First, find out how much the schools you are interested in charge now. Then estimate how much that figure is likely to have risen by the time your child is due to start.

"This gives you an actual target sum to aim at. Then you need to work out how to get there. Ask yourself how much you can save and for how long, then, after taking professional advice, decide on the best investments to meet those targets. A mix of different assets is likely to be best. How much time you have, and the investment growth you require, determine how much risk you should take."

If you have just a couple of years to save, said Mr Connolly, you should avoid volatile assets. Equally, if you've worked out that you need an investment return of only 4pc a year, why take risks with assets that offer a chance of 20pc but could also fall in value?

"There is no one product that does the job for everyone – it depends on each family's circumstances," he said.

If grandparents are keen to help with fees, involve them as early as possible in your planning and co-ordinate their contributions with your own, suggests Mr Connolly. If grandparents do get involved, it can help to reduce their eventual inheritance tax bill.

Your plan should also take account of your other financial objectives, such as preparing for your own retirement, he added. "It's no good coming up with a plan to pay for private education if it means you face an impoverished old age."

Mr Connolly is not a believer in remortgaging to pay school fees. "Many people are forced to consider releasing equity from their home but it should be a last resort, as you are increasing your debt. If you do have to borrow, however, perhaps because your decision to go private was taken at the last minute, then it's best to do so at the lowest possible interest rate, which means a loan secured on your property.

"But if you are able to plan ahead, or have adequate investments, remortgaging shouldn't be part of the plan."

Ms Gee added: "I see a lot more grandparents, who don't want their wealth to be caught up in inheritance tax and care fees and have strong values about private education, who are willing to fund fees for their grandchildren.

"This is pushed by the fact that, for the past few months, interest rates are even lower than before and there is little benefit to holding on to excess sums of money.

"Another large group of people are using the equity in their property to pay for school fees. However, it is harder to get extra borrowings when there is little equity in the home."